What Makes Independent Oil, Gas Companies Successful?

What Makes Independent Oil, Gas Companies Successful?
Rigzone speaks with analysts about which traits make a successful independent oil and gas company.

Rigzone’s inaugural Ideal Employer Survey highlights what our readers see as the top independent oil and gas companies, with U.S. independent Anadarko taking the top slot. The survey of 8,466 participants, mainly drawn from Rigzone’s database of oil and gas professionals, sought to gather insight on the qualities that workers want from an employer. But what makes for a successful independent oil and gas company that is able to attract top energy professionals? Industry analysts shared their views with Rigzone.

Speed, Agility Key to Oil, Gas Independents Strategy, Success

In today’s environment, two components are needed for a successful independent oil and gas company – good people and good assets – Kris Nicol, principle analyst with Wood Mackenzie’s corporate service practice said.

“You have to be in the right parts of the right plays, particularly if you’re focused on the onshore Lower 48 [U.S. states],” Nicol commented. Independent oil and gas companies also have to have the right strategy in place to facilitate growth, which often or not includes a strong balance sheet. Whether a company has maintained its hedge through the downturn is another factor of continued success. Companies that have continued to invest, maintained consistency in their approach and haven’t taken on too much risk will be successful, Nicol said.

The key to independent oil and gas companies’ success has been their speed and agility to react to the market, scaling their organizations and shifting their strategy, Linda Castaneda, U.S. Oil & Gas Advisory Leader with Ernst & Young, said.

The competitive nature of the independent oil and gas landscape has meant that independents, particularly smaller independents, need to innovate and adapt very quickly to technology, Thomas McNulty, director of Navigant Consulting’s transaction advisory services practice in Houston, said.

The smaller size of independents has also allowed for more agility. This is true of both midsize and large independents, the latter which include multi-billion companies with operations across multiple continents, said Castaneda. By comparison, the supermajors structurally are very challenged in terms of trying to make changes, Nicol said.

“Steering a supermajor is like trying to turn a supertanker around,” Nicol commented.

At smaller independent companies, communication is lightly to be more direct compared with a company with thousands of employees. Unlike major oil and gas companies with deepwater and oil sands assets, independent oil and gas companies have also had more flexibility in cost cutting during the past two years.

Linda Castaneda
Linda Castaneda, US Oil & Gas Advisory Leader, Ernst & Young
US Oil & Gas Advisory Leader, Ernst & Young

In larger companies, analysis paralysis can also occur as companies continue to gather data but fail to move forward with a decision. This is understandable due to the higher cost of being wrong. Independents, on the other hand, are able to make decisions quickly, but backtrack if they make a mistake, Castaneda said.

Another factor in mid and larger-size independent oil and gas company success is their ability to get the right data to make decisions, Castaneda said. Companies that have fully embraced Big Data and Internet of Things technology to gain access to data will be able to quickly integrate data.

“The supermajors also have spent a lot of money on technology, but it is how independents have been able to implement that technology at low cost that has made them more effective in the shale space,” Castaneda said.

Castaneda believes that the independents’ investment in technology and ability to make and learn from mistakes, will remain a recipe for success.

“However, even the independents know that, to survive in today’s new price culture, fundamental changes will need to be made to cost structure. Rather than just laying off workers and rehiring when prices recover, companies will need to become more digitized and truly transform their workforce for success,” Castaneda stated.

The challenge for these companies has been to implement the right infrastructure and global processes without losing the culture and small company mentality that has made them successful, Castaneda said.


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Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com

WHAT DO YOU THINK?

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Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
andrey | Nov. 21, 2016
in contrary the desire of many companies to merge & consolidate into bigger ones lead to where it is “TO BIG TO FAIL…”

bob blochowiak | Nov. 21, 2016
Smaller companies are not an inverted pyramid like large companies. It seems the smaller companies realize where the work is and what makes a business successful and its not in a cubical in some glass tower.


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